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Protecting and Building your Credit
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Lower auto and homeowner insurance rates
Lower rates on car loans Your credit may even affect your
ability to get a job!
How does good credit help you?
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Insurance companies have found a correlation between risk of accidents/claims and credit scores
Credit card companies and banks look at your credit history to determine the likelihood you will repay the loan
More risk = Higher rates
Why do companies charge more for people with bad credit?
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Better chance with a credit union Open a savings account first – can still get
ATM card, receive direct deposits, etc. May be able to open checking account at
bank used by employer Open an investment account; most
investment banks will open a bank account for you without a credit check (but may cost $500 or more to open)
Can I get a checking accountif I have bad credit?
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Apply for a credit card and make sure you pay it off each month
Discover.com has good cards for students with cash back incentives
Set up your credit card for automatic payments so you are never late
Establishing and Building Credit
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Secured Credit Cards Some people don’t quality for regular
credit cards Secured cards require a cash collateral
deposit that determines your credit line Banks may reward you for good
payment history and add to your credit line without additional deposits
Rebuilding Credit
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People usually qualify for a regular unsecured credit card after a year with the secured card
Switch as soon as you can to an unsecured card as fees and rates are lower
Better than a prepaid card for rebuilding credit because a prepaid card = debit card (they are not reported to the major credit bureaus)
Secured Credit Cards
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Watch out for fees: Don’t pay an application fee Don’t pay insurance policies!! Annual fees lower at credit unions Read the fine print! Ask how long the issuer will keep your deposit
after card is closed Make sure card issuer DOES report to three
major credit bureaus Ask the card issuer if they flag report to
credit bureaus as a secured credit card
Secured Credit Cards
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Get the lowest annual fee you can Just charge a few things each month
and pay off entire balance each month Don’t go into credit card debt! It can
takes YEARS and YEARS to repay: Calculator
Compare credit cards at BankRate.com or look into cards through a credit union (i.e. Global)
Recommendations
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annualcreditreport.com is free Can check for free once a year from
each credit bureau TransUnion Experian Equifax
Check your Credit Reports
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Credit reporting agency used by 80% of banks
You can get one free report per year from their Web site
Some credit unions don’t use ChexSystems If you owe one bank money, you may not
be able to open account at another bank if they run report in ChexSystems
You can apply for account online to avoid embarrassment
ChexSystems
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Location across from STA Plaza They offer secured loans for $250 or
$500 with no credit check and no fee at 5% interest. They are reported to Equifax as installment loan.
They offer two secured credit cards; to qualify, you can’t owe more than $500 to another bank. Annual fee is low ($12 or $18) and interest rate about12% or 18%.
Global Credit Union
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$20 to join (one-time fee) After 6 months to a year, most
qualify for a regular credit card (it depends on your credit history)
Global Credit Union
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How do I pick a stock? What are good investments? What’s a Roth IRA?
Your Questions
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What is equity? How do I choose a bank for a home
loan? Compare, compare, compare! Points vs. interest rate
Debt-to-income ratio? Does it make sense to refinance? Selling a home to limit taxes Tax Info Best place to invest that money?
Owning a Home
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You have to pay extra for it Precise formula for calculating it is a
mystery, but experts estimate it is calculated this way: 35% based on your payment history 30% based on credit utilization 15% based on length of time you’ve had credit 10% based on new credit 10% based on the types of credit you currently
have
Your FICO Score
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How do I estimate my power bill? Track your expenses for a few
months to develop a budget/see where your money goes
Consider using “money buckets” or envelope system
STCU Web Site
Budgeting
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Limit the number of credit cards you have Clean up your score
If a company no longer exists or a bank has merged with another, bureaus are required to remove information because it is no longer verifiable
Try to keep debt utilization rate low (people with best credit scores borrow 7% or less of limit)
All 3 credit bureaus allow you to add a brief statement to report, which may help with employers
Strategies for Improving your Score
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Credit repair offers Some dispute all of your accounts, but
after credit bureaus validate the accounts, they appear on your report again
Secured credit cards with monthly fees or application fees
Stay Away from These Things!!
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How do you have paid items removed from your credit? Info
How do you build your credit? How can I get the best car loan deal? How is interest calculated? Stay
tuned! Teaching kids they can’t buy
everything Choosing lowest car insurance Considering bankruptcy
Miscellaneous
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Moneysavingmom.com Clarkhoward.com http://balancetrack.org/
How to Teach Teenagers (& yourself) Good Web Sites
AM Radio Shows Clark Howard Dave Ramsey
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Groceries Buy generic brands Consider low-cost protein sources like
beans Get the Wednesday ads and stock up on
good deals Use leftovers
Ways to Save Money
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Clothes and furniture Buy second hand
Craigslist Consignment shops
Insurance Get several quotes Increase deductible
Check out books from the library Download music for free with Freegal
Ways to Save Money
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If you spend 30 minutes clipping coupons and you save $10.00 on groceries, that’s like earning $20 an
hour tax-free!
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Moneysavingmom.com Clarkhoward.com
Good Web Sites
AM Radio Shows Clark Howard Dave Ramsey
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Why do some rich people pay lower tax rates than middle-class taxpayers? Capital gain taxes vs. ordinary income
Different tax structures in different states Income taxes versus sales taxes
Other questions
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Use W-4 form worksheet to determine number of allowances
Income Taxes
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Cost of using money You pay interest when you borrow
money You earn interest when you invest
money
High interest rates are good for savers, bad for borrowers.
Interest
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Ties up your money for a period of time
Early withdrawal penalties, but higher rates than regular savings
No fee to purchase Doesn’t help build your credit Invest in bonus rate savings accounts
first
Certificates of Deposit (CDs)